PROPERTY REPORT MAIN OFFICE MARKETS IN WESTERN EUROPE

Transcription

1 OTY OT MAIN OFFIC MAKT IN WN UO

2 A A A A A A T A AA B A A CONCT INNION INVTMNT GOU eter oesler Tel.: peter.roesler@bnpparibas.com FANC tienne rongue 167 Quai de la Bataille de talingrad Issy-les-Moulineaux Cedex Tel.: etienne.prongue@bnpparibas.com GMANY Mathieu Brummer Goetheplatz Frankfurt am Main Tel.: mathieu.brummer@bnpparibas.com UNID KINGDOM Andrew Cruickshank 3 Charles II treet London W1Y 4A Tel.: andrew.cruickshank@bnpparibas.com ACH 167, quai de la Bataille de talingrad Issy-les-Moulineaux Cedex France Tel.: +33 () Christophe ineau Head of International esearch Tel.: +33 () christophe.pineau@bnpparibas.com Zsolt NNKOV esearch analyst zsolt.nenkov@bnpparibas.com OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 XCUTIV UMMAY Office investment outperforming occupier demand Letting activity in major Western uropean markets recorded a further drop in Q2 impacted by the negative economic context. tability in vacant office space prevails as completions are still relatively low, but rents remain under downward pressure in the weakest occupier markets. Office investment is proving resilient despite the downturn and uncertain occupier fundamentals. The 2 nd quarter is marked by the return of uncertainty Office take-up maintains under last year s level in major markets dropping Office investment volume strengthens further in Q2 Munich soared in activity 2 July 212

3 A A A A A A T A AA B A A MACOCONOMIC CONXT The uro area economy entered 212 with improved financial market sentiment, on the back of two significant liquidity boosting operations by the CB. This helped to stabilise activities in Q1. But recent political and economic events saw the return of uncertainty and leading indicators have fallen sharply in recent months, pointing to a likely contraction in construction output pushed the economy into recession in Q1 and leaders will implement the measures taken during their last summit. Nevertheless, there is likely to be a time lag between the implementation overall in 212. In this economic environment, conditions in the labour markets are unlikely to improve any time soon. In recent months the unemployment underscoring the increased heterogeneity in economic trends across unemployment rates remaining at historical highs in most uropean countries amidst challenging economic backdrops. With the slowdown now becoming broad based, we expect any significant employment growth to be postponed until the second half of 213. GD and employment growth % * 13* * forecast ource: urostat, aribas eal state GD growth mployment growth OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 The slowdown in office demand was more pronounced in the second quarter of 212. On a rolling year basis between and all 9 major cities were in negative territory with the exception of Munich. Thanks to significant net absorption, the German office market proved contracted and take-up was under the average level of the past ten years in both cities. In Milan and Madrid, office demand remained weak in. The average vacancy rate of the 9 major markets was roughly stable compared to the previous quarter and over a year as well. The positive performance of the German cities compensated the sharp increase in the vacancy rate in Madrid which was fuelled by a significant release Milan, availability was merely stable on the previous quarter. Globally, office prime rents were unchanged compared to the previous quarter, contracting only in Madrid. In, on a rolling year basis, office investment achieved quite a recording several large deals. The poor state of the occupier demand in Madrid and Milan makes these markets riskier than before. In this context, the prime office yield in Milan continued to increase slightly but the general trend is that of yield divergence between German cities and Milan, Madrid or Brussels. Office take-up and supply Western uropean offices (9 cities) m 2 16, 14, 12, 1, 8, 6, 4, 2, * * olling Year Take-up upply 14,52 6,111 3

4 A A A A A A T A AA B A A In line with the evolution of the economy, occupier market conditions deteriorated as well in Q2. As unemployment continued to rise in most economies, net absorption weakened further since the start of the year. In this context, office take-up in the 9 major Western uropean cities a rolling year basis. Amongst major cities, only Munich and Brussels recorded an increase over last year. In Central aris, the lack of large transactions, which animated the market last year, was mainly behind the contraction in demand in the first half of 212, but small and middle-size office take-up weakened as well. The slowdown, which was already visible in the previous quarter, In Central London, the market slowed down as well and transactions were still under the long term average. In Q2, demand was driven by technology, media & telecommunications (TMT) as the financial segment remained less active in the current uncertain environment. Therefore, down on a rolling year basis, despite a strong Q2. The West nd proved to be a more resilient submarket despite some drop back in demand. OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 CONOMIC DOWNTUN I TAINING OCCUI DMAND IN WN UO Take-up volumes in 212 m m Central Central aris London ubmarket office take-up Munich Berlin FrankfurtHamburg Brussels Madrid Milan Western La Défense West nd City Docklands Crescent aris London Following an exceptional result in 211, the German office demand is more moderate in 212 so far, but transaction levels remain solid transactions compared to last year, occupier demand in Munich with demand strengthening significantly in Hamburg. In Milan, office market conditions were unchanged in Q2 and deepening economic recession is preventing any recovery in the short term. Indeed, increasing difficulties within the corporate sector are pushing companies to look for cheaper premises elsewhere, all the more so as availability is significant in other districts. In Madrid, market conditions remained difficult with no improvement in sight from the real economy. With occupier demand remaining at low levels, net absorption resulted negative again in Q2. Within market year s level. In Brussels, the significant improvement in take-up in H1 212 was driven by demand from the public sector and in particular the uropean institutions. olling year take-up change vs office take-up m % -4 Brussels Munich Hamburg Madrid Central aris Munich Frankfurt Hamburg Berlin Berlin Frankfurt Central London Madrid Brussels Milan Milan 4

5 A A A A A A T A AA B A A supply in the 9 cities rose to 2.3 years compared to 2.2 years previously reflecting the slowdown in transactions. In Central London, completion was low in H1 212 at around 37, m² supply, the vacancy rate was roughly stable for all Central London submarkets and even increased slightly in the West nd where demand was quite weak in Q2. As completions will remain limited, a reduction in office vacant space is more likely for the rest of the year though. In Central aris, the vacancy rate increased slightly in all submarkets compared to the previous quarter. Meanwhile completions remained quite significant, less office space was absorbed in Q2. With more office space under construction - represented by several large projects in La further by the end of 212. OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 GMAN CITI NU AVAG VACANCY A MAIN CONNT Vacancy rates 1, % ubmarket office supply m 2 6 Berlin Central Hamburg Munich Central Brussels Milan Frankfurt Madrid London aris Western La Défense West nd City Docklands Crescent aris London Within major uropean markets, Germany is clearly an exception with contracting vacancy rates in its 4 main office markets. For instance, rate amongst major uropean office markets. The fastest reduction in for modern premises remained strong. Given the high share of pre-lets in future deliveries and current demand trends, further reductions in vacancy rates are likely in the next couple of quarters. In Milan In Madrid, the increase in availability is due to a large amount of office space released onto the market. In Brussels, only a slight improvement occurred in vacant space as completions remained very low. atio of take-up to supply years office supply m Central Central Munich Hamburg Berlin BrusselsFrankfurt Milan Madrid aris London * olling Year Munich Frankfurt Hamburg Berlin Madrid * Brussels * Milan 5

6 A A A A A A T A AA B A A In the second quarter of the year, the average prime rent growth of the 9 major markets was flat compared to last year. tability prevailed on the previous quarter as well, except the slight growth in Hamburg and the new rental drop in Madrid. The prime rent in Central London was stable again. The rents in the City are expected to stay resilient but there is more potential for rental growth in the West nd as supply should remain limited in the following quarters. In Central aris, prime rent was stable as well but average rents acted differently in the main submarkets. They fell back in the availability is the most limited. In Germany, only the prime rent in Hamburg continued to climb in Q2. The new prime rent was achieved in the Hafen-City area where several office premises were recently completed. Average rents continued to rise premises. We expect the ongoing reduction in vacant space to sustain rental growth for the rest of the year in the German cities. OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 AVAG NT A UND DOWNWAD U IN TH WAKT MAKT Office prime rents /m²/year 1,6 1,4 1,2 1, 8 6 Average office rent /m²/year 1, Central London Central aris max London West nd London City London Docklands aris Milan aris La Défense Western Crescent Madrid In Milan, the current state of the market and the ongoing rise in availability allow occupiers to have more room in rental negotiations. Although the prime rent is maintained so far, it will remain under downward pressure for the rest of the year when a drop, its first, is expected. Average rents are less resilient so far and continue to drop The prime rent in Madrid contracted again following a stabilisation during the past two quarters. The same trend was recorded for average rents and the current lack of demand suggests that they might have not bottomed out yet. On the other hand, rents in Brussels could increase by the end of the year, should the expected reduction in immediate supply be confirmed. Office prime rents /m²/year Average office rent /m²/year Milan Frankfurt Munich Madrid Hamburg Brussels Frankfurt Munich Hamburg Brussels Berlin max Berlin

7 A A A A A A T A AA B A A in Q2, total office investment volume surprised on the upside in major Western uropean cities in. The quite significant increase on a rolling year basis compared to was driven by some large deals trend, activity could lose momentum by the end of the year. Indeed, confirmed economic recession and weakening occupier demand should impact investment markets. In Central London, quarterly office investment volume has been on a slightly upward trend since the beginning of the year; however the office volume was still under last year s level in all submarkets on a rolling year basis. Investment activity was driven by strong demand from foreign buyers, who focused as always on London. Central aris driven by some large transactions. Investors concentrated on core properties offering secured income stream. Most deals were recorded in as the environment is likely to remain uncertain investment is expected to slow down. The German cities held up well in office investment in Q2 as well. This was supported by a continuous vacancy rate drop and therefore potential OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 OFFIC INVTMNT MAK HADWAY THANK TO LAG D Office investment volume breakdown share of 9 main markets billion olling year investment change % 227% 83% Other Western urope Main markets (9 cities) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q / Munich Madrid Central Central Berlin Hamburg Frankfurt Brussels Milan aris London for additional rental growth. Thanks to some very large deals Munich recorded the strongest increase amongst major cities and became the leading German investment market over the past 4 quarters. Milan fall in investment between and on a rolling year basis. In view of the weakness of the occupier market and the implied increase in risk, investors are asking higher yields. ince landlords are not obliged to sell, the market appears blocked. Therefore, prime yields are expected to rise further in the following quarters, a trend that already started a year ago. In Madrid, the sharp increase in office investment on a rolling year basis was achieved thanks to a very large deal in Q Otherwise, the market has been quite inactive in 212 so far because of subdued investor confidence. The office prime yield is unchanged for now but upward yield pressure persists due to the state of occupier markets and the decline in investment activity. In Brussels, office investment in the first half year was one of the lowest of the past ten years. The lack of interest for offices has pushed the office prime yield up by 25 bp to Main office investment markets in Western urope ( rolling year) Net office prime yields % 7% 4% 3% 33% 3.5 Central Central Munich HamburgFrankfurt Berlin London aris 46% High point Central London Central aris Frankfurt Munich Hamburg Berlin Madrid Milan Brussels Milan Madrid Brussels 7

8 A A A A A A T A AA B A A MAIN OFFIC UBMAKT OFFIC MAKT INDICO OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 Take-up (m 2 ) (rolling year) Vacant space (m 2 ) Average rent ( /m 2 /year) (12 months) (12 months) yearon-year change Q1 212 Q , 55, 86, 949, 914, 872, , 442, 75, 395, 347, 35, , 167, 12, 222, 219, 29, London - City 417, 555, 12, 729, 739, 73, London - West nd 282, 287, 52, 316, 297, 328, , 134, 8, 156, 157, 162, , 255, 49, 59, 545, 577, , 134, 3, 138, 153, 193, , 123, 26, 152, 16, 192, , 18, 14, 265, 293, 252, , 185, 66, 532, 564, 627, , 74, 12, 17, 179, 193, , 79, 6, 84, 98, 89, Constant exchange rate / = INVTMNT MAKT INDICO (12 months) Office investment volume ( million) Office prime yield (%) (12 months) year-on-year change Q ,213 1,549 1, ,76 2, London - City 7,255 7,491 2, London - West nd 4,154 4, n.a. n.a. n.a , Constant exchange rate / =

9 A A A A A A T A AA B A A OFFIC MAKT INDICO WN, CNT AND N UO (12 months) Take-up (m 2 ) (rolling year) (12 months) Vacancy ate ( %) OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 rime Office ents ( /m 2 /year) Avg. Q1 212 Q1 212 Central aris 1,75 1, Moscow 1,12 1, n.a. n.a. Central London 1,42 1, ,328 1,328 1, Munich Hamburg Berlin Frankfurt Brussels Düsseldorf Madrid Cologne Bucharest n.a. n.a. t etersburg Milan Amsterdam Lyon Barcelona Luxembourg Toulouse n.a. n.a. Lille n.a. n.a. n.a Marseille n.a. n.a. n.a Lisbon n.a ome Manchester The Hague Glasgow Birmingham dinburgh Kiev n.a. n.a. n.a n.a. n.a. Constant xchange rate / = ents in ounds: Central London Manchester Glasgow Birmingham dinburgh

10 A A A A A A T A AA B A A INVTMNT MAKT INDICO WN, CNT AND N UO OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 Office investment volume ( million) (rolling year) Office prime yields ( %) (12 months) (12 months) Q1 212 Central London 14,578 13,8 4, Central aris 1,521 7,943 2, Munich 2, Frankfurt 1,2 2, Berlin 1,11 1, Hamburg 949 1, Düsseldorf Madrid Lyon Amsterdam Vienna ome Manchester Brussels Milan Cologne The Hague Marseille Luxembourg Barcelona Birmingham Glasgow Lisbon Lille Toulouse dinburgh Bucharest Constant xchange rate / =

11 A A A A A A T A AA B A A GLOAY as comparable as possible. This is a complex issue, due to cultural differences from market to market. Nevertheless, as we aim to actively contribute to the transparency of the markets, we have high lighted those definitions and indicators which are strictly comparable, so that our readers can understand what the indicators mean. 1 definitions, on which most 2 esearch. is the average of each of the last four by the surface of each lease signed during the quarter, in either new or second- Completions represent the total amount of floor space that has reached practical completion and is occupied, ready for occupation or an occupancy permit where required has been issued during the survey period. Central London outhbank, Western Fringe and Northern Fringe. Western Crescent and Inner im. Closed nded Fund is a vehicle that has a targeted range of investor capital and a finite life. represents the total amount of floor space for all developments under construction and/or schemes (including major refurbishments) that have the potential to be built in the future through having a secured level of planning permission but remain unimplemented at the survey date. It includes all proposed new buildings, those constructed behind retained facades and buildings (or parts of buildings) undergoing a change of use to offices. xchange ate from into for rents is the average value observed over the quarter. xchange ate from into for investment volumes for each quarter is the average value over that period. Full-year investment volumes in both currencies are made up by adding the four quarters of each year. German Open nded Fund is a public vehicle that does not have a finite life, continually accepts new investor capital and makes new property investments. marketable securities and other (non-operating) assets. Investment volume eal state is aware of, whose owner has changed during the studied period, whatever the purchasing price. It includes Office buildings, etail (supermarkets, hypermarkets), Industrial and Logistics Warehousing and Others (Hotels, Cinema, definitive and are consequently subject to change. Initial Gross Yield is defined as Gross income (i.e. income before costs of ownership) over purchase price excluding costs of acquisition. Initial Net Yield is defined as Net income (or NOI) over purchase price plus all other costs of acquisition. rime Office ent the survey date for an office unit: - of standard size commensurate with demand in each location - of the highest quality and specification - in the best location in a market Investment volume by investor/seller type refers to the following categories: IT, Consortium, Funds and Other. Investment volume by investor/seller nationality refers to the following categories: urozone, Non-urozone, North America, Other America, Asia, Middle ast, Australia, International and Other. OTY OT - MAIN OFFIC MAKT IN WN UO - JULY 212 Major efurbishments represents refurbishments, where building work must involve either structural alteration, and/or the substantial replacement of the main services and finishes. The quality of the floor space must have been substantially improved from its previous condition so as to offer accommodation of a modern standard although not necessarily to the standard of a completely new building. Actual transactions are used in France, Germany and Belgium to support the headline prime rental quoted, but one-off deals, which do not represent the during the survey period a hypothetical rent is quoted, based on expert opinion of market conditions. pace calculation Completions) as well as ental values are based on Gross Letting Area space, contrary to the other main uropean markets, which use Net Letting Area. In order to make the panish figures comparable across all monitored markets, they should state to produce international indices and benchmarks. represents the total floor space known to have been let or pre-let, sold or pre-sold to tenants or owner-occupiers during the survey period. It does not include space that is under offer - A property is deemed to be taken-up only when contracts are signed or a binding agreement exists - - All deals (including pre-lets) are recorded in the period in which they are signed - Contract renewals are not included - ales and leasebacks are not included as there had been no change in occupation - Quoted take-up volumes are not definitive and are consequently subject to change. The breakdown of take-up by business sector is compatible with the uropean NAC code. represents the total amount of floor space in properties where construction has commenced on a new development or a major refurbishment (see separate definition) at the survey date. It includes properties for owner occupation, which are reported separately. It does not include sites being cleared for possible development in the future. separately where appropriate. Vacancy represents the total floor space in existing properties, which are physically vacant, ready for occupation in the next three months (this period covers fit-out space (except in Germany), but where possible, vacant sub-let space is recorded separately. In France, vacancy excludes premises which the owner will renovate only once a lease is signed. pain only counts immediately available space. represents the total vacant floor space including sub-lettings divided by the total stock at the survey date. 1 range of uropean advisors and investors and major agents. 2 the information contained in the present report turns out to be inaccurate information in it is dedicated to the exclusive use of its clients. The report and the information contained in it may not be copied or reproduced without prior hould you no longer wish to receive this report, or wish to modify the conditions of reception of this report, please send an to: unsubscribe.mailing@bnpparibas.com 11

12 A I A I A I T L T A I A A I A BULGAIA NOTHN ILAND T LOVAKIA WITZLAND TUKY A UA UKAIN lease contact Bernard Blanco Tel.: +33 () bernard.blanco@bnpparibas.com A UIA BIA Greg Cooke Tel.: +44 () greg.cooke@bnpparibas.com NTHLAND A JAAN A Nicolas Barbey Tel.: +33 () nicolas.barbey@bnpparibas.com A A A T A A A CYU A - esearch department July Non contractual document 212 A ĕ ā ńőŏŗ ŎŖœ œōŕ ń Ę œŗŏ ōŏŏ Ŏŕō Ę őŏŏō Ę ā ĕ œœœ Ŗŏō ŎŏŎ ŕō I T ĕ ŎœŔē Ę ŖŏŕœŔ Ę B N A AUTIA UNID KINGDOM 5 Aldermanbury quare ŏ ŕ Tel.: Fax: A I A GC A A A I OMANIA 11 Ion Campineanu treet 6th floor, 1st district Bucharest 131 Tel.: Fax: LUXMBOUG Axento Building Ė Ė őő 1855 Luxembourg Tel.: Fax: ACH Tel.: +33 () christophe.pineau@bnpparibas.com GMANY Goetheplatz Frankfurt Tel.: Fax: NIA A Tel.: +33 () guillaume.delattre@bnpparibas.com JY Ő ē 2-6 Anley treet ē ő ŕ Tel.: +44 () Fax: +44 () A CLINT OLUTION A A A FANC 167, Quai de la Bataille de talingrad Issy-les-Moulineaux Tel.: Fax: OTH LOCION OLAND Ė Ë ŏœ -854 Warsaw Tel.: Fax: AIN ¾ ē Œő 286 Madrid Tel.: Fax: ITY Corso Italia, 15/A 2122 Milan Tel.: Fax: DUI maar quare ű Ŏē Ŕth Floor Ė Ė ŔŏŐŐē Á Tel.: Fax: Tel.: +33() david.aubin@bnpparibas.com A ILAND 2 Merrion oad, ő Tel.: Fax: Lauric Leclerc Tel.: +33 () lauric.leclerc@bnpparibas.com BLGIUM Boulevard Louis chmidtlaan 2 B3 14 Brussels Tel.: Fax: CZCH UBLIC Ý û ¾ Ő Ŏŕœ ōō ŕ Tel.: Fax: roperty Management A Ę Tel.: +33 () jean-claude.j.dubois@bnpparibas.com HUNGAY Alkotás u. 53. H-1123 Budapest, Tel.: Fax: INDIA 21, 2nd Floor, 1 North Avenue, Maker Maxity, Bandra (), Mumbai-451 Tel.: Fax.: A ylvain Hasse Tel.: +33 () sylvain.hasse@bnpparibas.com Consulting A Tel.: peter.roesler@bnpparibas.com A International Investment Group A I A ABU DHABI Al Bateen Area ű Ŏőőē ĘŎŎ New Al Bateen Municipality ű Őŏ Ė Ė ŏŕőŏ Tel.: Fax: Tel.: +33 () barbara.koreniouguine@bnpparibas.com T L A A I A MAIN LOCION roperty development Investment Management A I A I A A I A L T A I L T A A I I VIC OFF Valuation A I A I A I A I L T A I N A I A I A I A I UA